Forex Trading Tips

By Tim Lee

When primitive people have invented money, all they have in mind is to find some means to solidly show the actual exchange of goods or services between two persons or groups. Since then, any exchanges of goods have been centered on money, bearing the most tangible form of trade.

As time pass by, trading has significantly evolved in different industries where money is not the primary agent. Trading becomes a profitable venture; and had created a remarkable spot in the economy.

Today, there are many kinds of trading. Every type of trading depends on the kind of exchange that will take place. For instance, FOREX or foreign exchange trading focused on foreign currencies.

Among the many trading types, day trading has slowly etched a name in the industry. With its remarkable turn of profits, day trading has quite gained a good reputation.

What is Day Trading?

Day trading generally stands for the system of selling and buying financial tools such as bonds or stocks throughout the day.

In other words, day trading is a series of material exchanges that all happens within the day. Hence, in day trading, every piece of stock bought has its corresponding sale. The profit or deficit is identified on the discrepancies between the goods and the trade price.

The main concept of day trading is based on the premise that all of the transactions are carried out within the day to ensure that there are no changes on the current closing price.

Changes usually take place overnight, where the preceding closing price will be changed depending on the result of the day's trading activities.

Sounds easy? Guess again.

Day trading may not sound complicated and may not even look perilous to one's financial status. However, trading experts say that more people tend to lose during the day trading. Statistical reports show that nearly 90% of day traders spend more money without gaining something in return.

For this reason, it is important that every day trader should know how to deal with the matter intelligently. It takes some wits and quick thinking just to overcome any probable loss in day trading.

Here are some day trading tips for dummies:

1. Chop down shortfalls quick

The secret is to regain back what you have lost. Try to handle the situation positively and maneuver the condition to a constructive one. There is no use to cry over spilled milk. What you need to do is to reduce the losses with quick, sharp moves.

2. Go with the flow

Like traffic, taking the counter flow is not advisable in day trading. It would be better if you will just go with the flow. This means that you have to focus on the high-selling stocks and sell those that fall under "short-selling" stocks.

This is based on the belief that the development of stocks will continue to rise. Luckily, 8 out of 10 day traders find this strategy effective.

3. Control your emotions

Some day traders tend to be emotionally involved with their dealings.

In reality, day trading can really create hype. Hence, emotional people tend to act on impulse. Any good news will immediately alert day traders to expect a positive turnover of stocks. Hence, if you are too emotional, you may get excited and act without even evaluating the situation.

To avoid trouble, it would be better to control your emotions and analyze each condition first before making a move. If you lost, analyze the situation and identify where you have been wrong.

Do not take your defeats seriously. Keep in mind that an open mind is important to overcome problems encountered in day trading. This will help you achieve the profits that you want.

For a breakthrough approach to trading in any market, please visit http://www.day-trading-guide.info/

Article Source: http://EzineArticles.com/?expert=Tim_Lee

Posted by Orce Dimitrov at 6:38 AM | Permalink | Comments

By Rich McIver

For those unfamiliar with the term, FOREX (FOReign EXchange market), refers to an international exchange market where currencies are bought and sold. The Foreign Exchange Market that we see today began in the 1970's, when free exchange rates and floating currencies were introduced. In such an environment only participants in the market determine the price of one currency against another, based upon supply and demand for that currency.

FOREX is a somewhat unique market for a number of reasons. Firstly, it is one of the few markets in which it can be said with very few qualifications that it is free of external controls and that it cannot be manipulated. It is also the largest liquid financial market, with trade reaching between 1 and 1.5 trillion US dollars a day. With this much money moving this fast, it is clear why a single investor would find it near impossible to significantly affect the price of a major currency. Furthermore, the liquidity of the market means that unlike some rarely traded stock, traders are able to open and close positions within a few seconds as there are always willing buyers and sellers.

Another somewhat unique characteristic of the FOREX money market is the variance of its participants. Investors find a number of reasons for entering the market, some as longer term hedge investors, while others utilize massive credit lines to seek large short term gains. Interestingly, unlike blue-chip stocks, which are usually most attractive only to the long term investor, the combination of rather constant but small daily fluctuations in currency prices, create an environment which attracts investors with a broad range of strategies.

How FOREX Works

Transactions in foreign currencies are not centralized on an exchange, unlike say the NYSE, and thus take place all over the world via telecommunications. Trade is open 24 hours a day from Sunday afternoon until Friday afternoon (00:00 GMT on Monday to 10:00 pm GMT on Friday). In almost every time zone around the world, there are dealers who will quote all major currencies. After deciding what currency the investor would like to purchase, he or she does so via one of these dealers (some of which can be found online). It is quite common practice for investors to speculate on currency prices by getting a credit line (which are available to those with capital as small as $500), and vastly increase their potential gains and losses. This is called marginal trading.

Marginal Trading

Marginal trading is simply the term used for trading with borrowed capital. It is appealing because of the fact that in FOREX investments can be made without a real money supply. This allows investors to invest much more money with fewer money transfer costs, and open bigger positions with a much smaller amount of actual capital. Thus, one can conduct relatively large transactions, very quickly and cheaply, with a small amount of initial capital. Marginal trading in an exchange market is quantified in lots. The term "lot" refers to approximately $100,000, an amount which can be obtained by putting up as little as 0.5% or $500.

EXAMPLE: You believe that signals in the market are indicating that the British Pound will go up against the US Dollar. You open 1 lot for buying the Pound with a 1% margin at the price of 1.49889 and wait for the exchange rate to climb. At some point in the future, your predictions come true and you decide to sell. You close the position at 1.5050 and earn 61 pips or about $405. Thus, on an initial capital investment of $1,000, you have made over 40% in profits. (Just as an example of how exchange rates change in the course of a day, an average daily change of the Euro (in Dollars) is about 70 to 100 pips.)

When you decide to close a position, the deposit sum that you originally made is returned to you and a calculation of your profits or losses is done. This profit or loss is then credited to your account.

Investment Strategies: Technical Analysis and Fundamental Analysis

The two fundamental strategies in investing in FOREX are Technical Analysis or Fundamental Analysis. Most small and medium sized investors in financial markets use Technical Analysis. This technique stems from the assumption that all information about the market and a particular currency's future fluctuations is found in the price chain. That is to say, that all factors which have an effect on the price have already been considered by the market and are thus reflected in the price. Essentially then, what this type of investor does is base his/her investments upon three fundamental suppositions. These are: that the movement of the market considers all factors, that the movement of prices is purposeful and directly tied to these events, and that history repeats itself. Someone utilizing technical analysis looks at the highest and lowest prices of a currency, the prices of opening and closing, and the volume of transactions. This investor does not try to outsmart the market, or even predict major long term trends, but simply looks at what has happened to that currency in the recent past, and predicts that the small fluctuations will generally continue just as they have before.

A Fundamental Analysis is one which analyzes the current situations in the country of the currency, including such things as its economy, its political situation, and other related rumors. By the numbers, a country's economy depends on a number of quantifiable measurements such as its Central Bank's interest rate, the national unemployment level, tax policy and the rate of inflation. An investor can also anticipate that less quantifiable occurrences, such as political unrest or transition will also have an effect on the market. Before basing all predictions on the factors alone, however, it is important to remember that investors must also keep in mind the expectations and anticipations of market participants. For just as in any stock market, the value of a currency is also based in large part on perceptions of and anticipations about that currency, not solely on its reality.

Make Money with Currency Trading on FOREX

FOREX investing is one of the most potentially rewarding types of investments available. While certainly the risk is great, the ability to conduct marginal trading on FOREX means that potential profits are enormous relative to initial capital investments. Another benefit of FOREX is that its size prevents almost all attempts by others to influence the market for their own gain. So that when investing in foreign currency markets one can feel quite confident that the investment he or she is making has the same opportunity for profit as other investors throughout the world. While investing in FOREX short term requires a certain degree of diligence, investors who utilize a technical analysis can feel relatively confident that their own ability to read the daily fluctuations of the currency market are sufficiently adequate to give them the knowledge necessary to make informed investments.

Rich McIver is a contributing writer for The Forex Blog: Currency Trading News ( http://www.forexblog.org ).

Article Source: http://EzineArticles.com/?expert=Rich_McIver

Posted by Orce Dimitrov at 12:27 AM | Permalink | Comments

By Stephen Todd

This article gives you a complete guide to currency technical analysis. We explain why it works, and show you how you can use technical analysis in the currency markets, to make huge profits.

Many traders don’t fully understand the advantages of technical analysis - and scoff at it, saying that it can’t work.

We will however, show you how to use currency technical analysis the right way, to make big profits – so let’s get started.

What is Currency Technical Analysis?

It is simply defined as the study of price action through the use of charts - for the purpose of identifying price trends. It’s not a science, as many chartists claim - it’s an art, and it works! Why? Because technical analysis reflects human psychology. What about the supply and demand fundamentals, you may ask - well it takes them into account too.

Currency technical analysis uses the following equation:

Market Perception (trader psychology) + Fundamentals = Price Action

All currency technical analysis does, is postulate that all fundamentals are quickly reflected in price action (and in the 21st century with our advanced communications this is truer than ever) - so it simply concentrates on price action. It really is that simple!

Price action reflects all the fundamentals, and more importantly, how the participants perceive them.

Traders who study fundamentals claim that you can’t use technical analysis - because you need to know and study the fundamentals, to know where prices are going - this is simply not true! Some of the largest price moves in history, have occurred with little or no change in the fundamentals.

It’s a fact that markets are generally most bullish at market tops and most bearish at market bottoms - and these markets occurred with little or no change in the fundamentals. Human psychology was at work here - and currency technical analysis studies this, as well as fundamentals.

Learn to use technical analysis, and you will see the reality as it is - rather than listening to the opinions of others. Keep in mind that 90% of traders lose money - because they’re influenced by greed and fear created by the news services.

Charts allow you to see the reality - and that’s a huge advantage.

Currency technical analysis makes the following assumptions:

1. Markets Discount

All fundamentals show up quickly in the price action, when you use technical analysis. You are therefore studying the fundamentals as they are - not trying to guess their impact - and of course, you’re studying human psychology as well.

2. Trends Persist

Currency technical analysis can prove this - just get out a chart of any currency, and you’ll see long term trends - many lasting for several years.

History Repeats

The basis of currency technical analysis, is that what has happened in the past, will happen again - and that’s why it’s so effective.

Human behaviour repeats itself - and since price patterns reflect shifts in human psychology, we can assume that certain patterns and trends will repeat themselves.

Your Aim

Your aim is to use technical analysis to catch, and hold the longer-term trends. Keep in mind that human behaviour does repeat itself - but humans can be unpredictable as well!

Keep in mind that technical analysis is an art, not a science. Be wary of theories that say they can predict with scientific accuracy - they can’t! - If they could, we’d all know the price in advance - and there’d be no market.

The good news is that by using technical analysis in the money markets, you can get the odds on your favour - and make big long-term profits.

Trade the Odds with Currency Technical Analysis

In gambling, the aim is to get the odds in your favour - and in trading, your aim should be to trade only when the odds are in your favour. You won’t win every trade - but neither can the top football players score from every kick at the goal.

By following the information outlined here, and putting in a little work and preparation, you could soon be racking up huge long-term profits by using currency technical analysis.

New! A valuable FREE Currency Trader CD containing 9 critical trading reports, tips, strategies and technical analysis. Visit our web site now and grab your CD http://www.tradercurrencies.com

Article Source: http://EzineArticles.com/?expert=Stephen_Todd

Posted by Orce Dimitrov at 1:36 AM | Permalink | Comments